China Continues to Prop Up Its Ailing Factories, Adding to Global Glut

Ingots stack up at Aluminum Corp. of China, or Chalco, which was able to keep a struggling smelter open thanks to government incentives.
Photo:
Imaginechina/Corbis

China is doubling down on efforts to keep unprofitable factories afloat despite for years pledging to curb excess capacity, adding to a glut of basic materials flooding the global economy. As WSJ's Brian Spegele and John W. Miller report:

The country’s overproduction of steel, aluminum, diesel and other industrial goods has driven down prices and crippled competitors, leading to thousands of lost jobs in the U.S. and elsewhere.

China’s continuing aid for unneeded factories is triggering a sharp rise in trade disputes and protectionist sentiment, especially in the U.S., where trade has emerged as one of the pivotal issues in the U.S. presidential election.

According to a Wall Street Journal analysis of Chinese public companies, Chinese government support includes billions of dollars in cash assistance, subsidized electricity and other benefits to companies. Recipients include steelmakers, coal miners, solar-panel manufacturers, and other producers of other goods including copper and chemicals.

One beneficiary, Aluminum Corp. of China, or Chalco, said in October one of its units would shut down a roughly 500,000-ton-per-year smelter in the far-western Gansu region as it struggled to make profits. Executives prepped for thousands of layoffs.